Venezuela's central bank shows gold reserves

Francisco Rodriguez, an economist for Bank of America, recently had the opportunity to peek into the gold vault of Venezuela's central bank. Together with four others, he was taken by a central bank employee to a room under the bank building, where he was spread over five different compartments. Gold bars layers piled up.

Rodriguez made a quick calculation of the total gold supply in the basement of the central bank. That calculation yielded a total volume close to the official gold reserve of 367.6 tons, leading Rodriguez to conclude that the central bank does indeed have all the gold it claims to have.

Venezuela's gold reserves are at the current level of Gold price worth about $15 billion. This reserve is a guarantee for the country's creditors, who are more concerned about the repayment of the debts due to high inflation and the poor economic situation. "In your imagination, you need a lot of space to store such a large amount of money, but in reality, it all fits into five small spaces that turned out not to be even fully filled," the Bank of America economist told Bloomberg.

According to the World Gold Council, gold reserves make up about 71% of Venezuela's total reserves. Of the $15 billion in gold, $13 billion is stored in Caracas, the remaining $2 billion is still in London.

Repatriation

The now deceased former president Hugo Chavez once had part of the gold reserve retrieved from the vaults in London with great bravado and under great media attention. The gold had to be returned to its own country, an initiative that was later discussed in other countries as well. For example, Germany started repatriating gold last year and there are petitions in other countries to bring the gold reserves back to their own country. Later this year, the Swiss will be able to indicate through an official referendum whether they want to bring back gold from abroad.

Venezuela's gold reserves are relatively large at 367.6 tonnes, but that says little about the country's economic health. Although Venezuela is rich in oil, the government is failing to stabilize the value of the currency. Because dollars are scarce, a vibrant black market for foreign money has emerged that businesses and consumers rely on to fund purchases in dollars and other currencies.